Thailand: Downturn in manufacturing output intensifies in October
Manufacturing production nosedived in October, contracting 8.5% year-on-year, down from September’s 5.1% fall. October’s print marked the steepest fall in output since December 2011 and suggests that economic growth will remain relatively muted in the final quarter of the year. A breakdown of the data showed that the steep drop in output was driven by a contraction in the manufacturing of food products as well as significant falls in the production of motor vehicles, trailers and semi-trailers; coke and refined petroleum products; rubber and plastics goods; and chemicals and chemical products.
Meanwhile, manufacturing output fell 0.4% in month-on-month seasonally-adjusted terms in October, up from the 2.7% fall in September. Annual average manufacturing production dropped 2.5% in October, down from a 1.3% contraction in September, which marked the strongest decline since January 2015.
Commenting on the result Prakash Sakpal, Asia economist at ING, noted that “weak manufacturing growth may appear consistent with more weak exports growth in October […]. But there is more to it than that.” In fact, Sakpal points to soft domestic demand dynamics as the main culprit. “This is also reflected by a double-digit decline in car sales in recent months”, Sakpal added.
To that end, the Thai government unveiled new stimulus measures on 26 November to the sum of USD 3.3 billion. Its effectiveness remains to be seen considering that the USD 10 billion stimulus package introduced in August has yet to boost demand. Moreover, the latest “data provides a strong reason for another rate cut at the December policy meeting. However, we don’t think the BoT will deliver a back-to-back cut, especially now that the government has unveiled more stimulus”, Sakpal noted.